TAME THE TAX SEASON TIGER: TIPS FOR A STRESS-FREE FILING EXPERIENCE (MENTAL HEALTH PROFESSIONALS)
With tax season on my mind, I thought I’d take a few minutes to help share some recommendations to help you mentally prepare for tax season and make the general vibe of tax time less chaotic. These recommendations are going to be geared towards the self-employed therapist/ mental health professional.
Tax season for the self-employed is arguably one of the most stressful times of the year. Compounding this already confusing time with uncertainty about how to manage your books, creates the perfect storm.
Over the next few weeks, I am going to be partnering with Heard to help answer and address your most pressing questions (re. taxes, bookkeeping, setting up a private practice, payroll, etc). They are an all-in-one accounting firm that helps mental health professionals prepare for tax season. If you have any questions, feel free to comment below or send me a message, I’d be happy to point you in the right direction!
If you are anything like me, the thought of incorrectly paying my taxes sends me into a tailspin of worry. Tax season can be a daunting time of year, but it doesn't have to be! With a little bit of organization and preparation, you can breeze through your taxes and even uncover some unexpected savings, which is always the best part. Nowadays, I like to think of it of it as a puzzle to solve or a challenge to conquer, rather than a chore— I attribute this change in mindset to the support I’ve received along the way. With the help of companies like Heard, filing your taxes, getting caught up on your books, and setting up payroll, has never been easier or more convenient. So, take a deep breath (with me) gather your documents, and let's tackle tax season together. With a positive attitude and just a tiny little bit of effort, you'll be on your way to a chaos-free tax season in no time!
Here are my top tips to help you avoid tax season chaos (as a self-employed mental health professional)
#1 Get familiar with your profit and loss statement
Ah, the Profit and Loss Statement - the bane of every business owner's existence! But fear not, my friends, for this statement is simply a financial report that tells you whether you're making money or losing it. It's like the scoreboard at a basketball game. So, if you're feeling lost in the numbers and confused by the jargon, just remember that the Profit and Loss Statement is nothing more than a way to keep score in the game of business.
What I’ve come to learn is that filing your taxes is not just about taxes. In fact, I’d argue, more than anything it’s about bookkeeping— keeping your P&L statement up to date. In order to file your taxes properly, you need to know how much income came in and how much money went out of your business each month. Expenses can include things like advertising, rent, supplies, employee salary, furniture, web hosting, internet, electricity, etc. A P&L statement indicates how gross revenue is transformed into net profit.
You can do what I did the first few years of business by keeping track of this on an Excel Sheet (this is the hard way) OR, you can use Heard to help you keep track of your books for you. With just a tiny bit of organization and forethought, tax season can be simple and pain-free if you stay on top of this one very important thing.
#2 Keep track of your expenses
If you're not keeping track of your expenses, you're basically driving blindfolded on a highway - it's a disaster waiting to happen! Tracking your expenses doesn't have to be a chore. In fact, it can be empowering to see where your hard-earned money is going each month. Think of it like a game - how much can you save this month? Can you find ways to cut back on unnecessary expenses and see where money is hemorrhaging from your account? As I am writing this I can think of a few subscriptions I need to cancel. So, grab a pen and paper and fire up your favorite expense tracking tool (cough, cough, Heard), and let's take control of our finances together. Trust me, your wallet (and future business) will thank you!
If you are brand new to the game, you might not know what is considered to be a “qualified expense” — as you open up your doors for business it is important to have a general idea of what an expense is. Here are some of the common expenses that might not have been on your radar: **this list is far from comprehensive, so please check with your CPA or favorite accounting firm to help you get the most bang for your buck.
- Your home office (the square footage of the room you use to conduct work)
- Education Expenses (not just for your degree)
- Medical Expenses (health insurance through the private marketplace)
- Advertising/ Promotion/ Marketing
- Webhosting
- Insurance
- Bookkeeping software
- Your Retirement Plan
& the list goes on…
Because of the way I strategically paid quarterly estimates, ran payroll, maxed out my Solo 401k, and worked with an accountant, I was able to significantly reduce my taxable income for 2022. Halleluja. I can not begin to explain how good it feels to receive money back from the government after you fully expected to write them a check. Please don’t take my word for it, check with Heard and your CPA to make sure you are optimizing your business and keeping track of your expenses so that tax time can be a celebration rather than a stress fest.
#3 Did you hire contractors?
Did you know you can hire contractors to get the job done just as well (if not better)? Hiring contractors can save businesses time and money, and give you access to specialized skills and expertise. Plus, contractors are like the superheroes of the business world - they swoop in, save the day, and then fly off to their next adventure. It's a win-win situation for everyone involved. So, if you're a mental health professional looking to receive support in a specific area, consider hiring some contractors and watch your business soar to new heights.
If you have already hired contractors to support your business, you need to make sure you deliver each one a copy of Form 1099-NEC and send another copy to the IRS, which I am sure your accountant has already explained to you, but if not, it’s time to get on that. It’s a bit of a headache. If you find yourself in this position, my advise would be to consult with a CPA and/or connect with a Company like Heard to get started familiarizing yourself with the in’s and out’s of this process— for further reading on the subject of working with contractors, you can read this blog post here. In short: You will need to collect each of your contractor’s Taxpayer ID # (TIN) / Social Security #, their full name, and address in order to issue them a 1099. Best practice would be to ask the contractor to fill out a Form W-9 when they begin working for you and to have this document in hand before tax season arrives so that you have all your ducks in a row before the madness of April 15th ensues.
#4 Decide how you are going to keep organized for the year ahead.
In my opinion, staying organized makes all the difference! It's like cleaning your room before your parents come home - it may seem like a pain at first, but it's worth it in the end. By keeping track of receipts, invoices, and other important documents throughout the year, you can save yourself a headache (and maybe even some money) come tax time. Plus, being organized is a great habit to have in all areas of your life - it can help you feel more in control and less overwhelmed.
What I’ve come to realize is that it’s best to reflect on how you are going to stay organized BEFORE the year begins, rather than after everything is due (like start to prepare for the 2024 tax season now, rather than this time next year). When you are first getting started, it can be hard to know what you don’t know. The first few years of my business I was very much in reactive mode, looking back—I realize this was probably unnecessary. Hindsight is always 20/20. If I could do it all again here is what I would have done differently from the get-go:
- Set up a time and the end of each month to go through my Profit and Loss statement – If you keep track of it every month it takes 20 minutes and is super straightforward, and easy to manage. If you let it all pile up until April 10th it can take hours and hours… sometimes even days to track everything down. Do yourself a favor and get your P&L statement for 2024 in order right now.
- Set up calendar invites to remind yourself to pay quarterly taxes estimates. Depending on your business structure, will owe both federal and state income tax estimates on a quarterly basis (deadlines are: April 18, 2023, June 15, 2023, September 15, 2023 & January 17, 2024). To make it even easier, bookmark the IRS website and your local state’s department of revenue site on your computer tabs and save your passwords in an easy-to-reach place so you don’t have to go searching all over god’s green pastures to pay quarterly estimates.
- Hire an accountant to file taxes for you. Forget Turbo Tax or trying to figure this out on your own. A skilled accountant can help you save thousands and is worth every penny. This was the very first thing I outsourced. I cannot even begin to explain how much stress this relieved knowing that a trained tax professional was working round the clock to help take care of this for me. For those of you who don’t feel super confident with the taxes, bookkeeping, and payroll side of running your business, hiring help with taxes should be the first thing you do.
If any of what I mentioned above makes you feel uncomfortable or think: what in the heck am I doing?! I highly recommend outsourcing these things to a company like Heard. They are a one-stop shop that can help you with all of your tax planning, bookkeeping, and payroll needs. You can visit this link here to schedule a free consultation with one of their experts.
That is it for today! Sending you all my love!!
XOX Dr. Jenn